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Sunday, February 03, 2008

The New York Times has a piece announcing that Microsoft will open its sixth "basic research" lab in July, this one headed by the mathematician Jennifer Tour Chayes (at left) and placed next door to MIT. Dr. Chayes will apparently "be one of the first women to direct a research lab run by an American corporation."

In the last couple of decades, industy has tended to close or spin-off its basic research labs, to rely on partnerships with academia, and to conduct what Intel calls "directed research" with two important features: 1) it is oriented toward short-term product development and 2) it maximizes its use of other people's research rather than developing everything in-house. Henry Chesbrough has dubbed this system "open innovation," and contrasts it with the in-house lab model. Is Microsoft partially reversing this trend?

The quick answer is no. Microsoft Research has 800 employees with doctorates. Google has 100. In its heyday, Bell Labs had well over a dozen major facilities, the largest of which, at Naperville-Lisle outside Chicago, had 11,000 employees.

Size isn't the only thing that matters. But we do know enough about the innovation process to know that randomness is a central variable - people get amazing data or have great insights at unexpected and unpredictable moments. Size does matter. Not in a linear way, where big = best, but in an unpredictable and yet semi-regular way. Throw in the fact that MSFT and GOOG are two of the wealthiest companies in history, and you are likely looking at an exception to the industry trend of oursourcing research rather than a trend that counters it.

And yet Microsoft Research is a tribute to the economic as well as the strategic value of basic research. As public university budgets are continuously squeezed, universities can afford less basic research. Given the country and the world's desperate research needs, this would be a good time for large companies - even those riding the revenue roller-coaster like Intel - to fund more basic than they are funding now.

P.S. I've avoided blogging on the Microsoft bid for Yahoo! because it makes me, well, sad. I started graduate school the same year that the IBM PC came out - 1981. As an academic I grew up with DOS, and snubbed Apple's graphical interface as kid stuff for almost 15 years. Now Microsoft and Windows are dated and stagnant, and Microsoft's amazing cash reserves (perhaps still as high as $30 billion before this offer) are a triumph of monopoly power over innovation. Joe Nocera at the New York Times sums all this up quite nicely.